The world has changed. Elevate, an online issuer of nonprime loans, is again planning to test the public markets, and this time it's in the anti-regulation environment championed by President Donald Trump.
Elevate pulled its IPO in January 2016, during a stock market swoon and on increased concern that credit markets would be tightening. The company, which counts venture firm Sequoia Capital as its biggest investor, filed on Monday to raise up to $124 million in an offering that would value the business at close to $500 million.
Because Elevate serves non-prime borrowers who would typically turn to brick-and-mortar payday lenders, its interest rates are much higher than what borrowers with good credit are used to seeing. That was a challenging proposition in the years after the financial crisis.
In 2010, President Obama helped create the Consumer Financial Protection Bureau (CFPB) to protect borrowers from deceptive and abusive financial practices.
Elevate, which was founded under a different name in 2001, has been operating under the assumption that Obama-era regulations were here to stay. That meant complying with rules the CFPB proposed in June to end "payday debt traps" by forcing institutions to take steps to ensure borrowers had the ability to repay their loans.
"We support the CFPB's proposed new regulations for nonprime credit and other efforts by the CFPB and many consumer groups to eliminate harmful practices and stop bad actors," Elevate said in its filing.
If Trump has his way, those proposals are headed out the window.
Trump has promised to roll back regulations, singling out the Dodd-Frank Act as one that's overly burdensome. The CFPB was formed as part of Dodd-Frank. Elevate isn't predicting how this will all shake out, but it has an obligation to inform investors of the uncertainty.
In its prospectus, Elevate highlighted a memo from Trump on Jan. 20, and two executive orders that Trump issued early in the year all meant to slash regulations.
"This memorandum and the aforementioned executive orders may not apply to the CFPB as an independent agency," Elevate said. "But It is unclear what impact the Trump Administration will have on the CFPB proposed rules."
More lenient regulations could be a boon for Elevate, though the company is telling investors not to bank on it.